Barclays Predicts Federal Reserve's Rate Cut by Year-End

Barclays Anticipates December Rate Cut from Federal Reserve

Barclays predicts that the Federal Reserve is set to enact another 25 basis point cut in December. This forecast stems from insights interpreted from the minutes of the recent Federal Open Market Committee (FOMC) meeting that occurred on November 6-7.

Insights from the FOMC Minutes

In a recent note, Barclays highlighted that these minutes showcase the Fed's inclination towards a gradual easing of monetary policy. This decision appears to depend heavily on the evolving landscape of the labor market as well as inflation trends.

This shift represents a departure from the earlier stance noted in September, where the committee made a more aggressive 50 basis point recalibration. Now, the focus is solidly on steering the policy rate closer to a neutral position.

Factors Influencing Policy Adjustments

The rationale behind this adjustment can be attributed to the reduced perception of downside risks associated with employment and overall economic activity. In their analysis, Barclays noted that this 'gradualism' allows for more agile adaptations to the balance of risks.

Moreover, confidence surrounding the trajectory of inflation was reinforced among participants. Factors contributing to this assurance included decreasing pressures on business pricing, stable inflation expectations, and the fading of wage pressures.

Concerns Among Participants

Despite the overall optimism, Barclays disclosed that some participants did voice concerns regarding the potential for disinflation to linger longer than originally anticipated. This divergence in perspective underscores the complexity of predicting economic movement in such a dynamic environment.

Upcoming Payrolls Report's Significance

Looking ahead, the upcoming November payrolls report is expected to play a crucial role in solidifying the anticipated December rate cut. According to Barclays, the results will significantly depend on how robustly payroll employment rebounds.

Future Projections by Barclays

In terms of future monetary policy, Barclays projects that there will be two additional 25 basis point cuts in 2025, one tentatively slated for March and the other in December. These cuts will occur only if no significant disruptions arise from tariffs or policy shifts.

Furthermore, the forecasts extend into 2026, where an additional two cuts are anticipated, specifically in June and September. If these projections hold true, this could bring the target range down to between 3.25% and 3.50% by the conclusion of that year.

Challenges Ahead

While the FOMC has refrained from speculating directly on policies expected from a new administration, Barclays interprets portions of the minutes as hints towards possible challenges. These could be related to sustaining recent supply-side gains, illuminating potential tensions that may arise in the future.

Frequently Asked Questions

What is Barclays predicting for the Federal Reserve?

Barclays anticipates a 25 basis point rate cut in December based on the latest FOMC meeting insights.

What factors influence the Fed's decision-making?

The Fed's decisions are influenced by labor market conditions and inflation trends.

How many rate cuts are projected in 2025?

Barclays projects two additional 25 basis point cuts in 2025, one in March and another in December.

What concerns did some FOMC participants express?

Some participants expressed concerns that the process of disinflation might take longer than expected.

What is the expected target range for rates by the end of 2026?

The target range is expected to decrease to between 3.25% to 3.50% by the end of 2026.

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